The Limits of Tech

Ryan Murphy

July 14, 2011

Technology and tech entrepreneurship has taken our culture by storm. As processing speed rises, components shrink, and prices fall, technology companies are providing devices and services the Jetsons would have envied.

We became amazed by the amount of computing power in our pockets and the amount of money techies are making. Then, we read a few articles on Mashable and Tech Crunch, watched The Social Network, and felt we had sufficient expertise to debate the superiority of Apple or Google’s business model or whether Netflix will displace the cable companies as the primary provider of television content.

Tech CEO’s are today’s rock stars. Lady Gaga has nothing on Steve Jobs. Surely more people worldwide know who he is. A ubiquitous logo marks his impact on society. His products and presentations whip normally rational people into a design-induced frenzy. Its only time before the Cult of Apple starts going door-to-door. “Have you seen the truth? Hold this iPad2.”

Jumping head of the curve, South Louisiana started developing its own technology ecosystem long before this cultural phenomenon exploded. Driven by a relatively small group of dedicated individuals, there is a notable optimism about the future of the tech industry in New Orleans and Baton Rouge. Even the Louisiana legislature has gotten on board by providing a handful of tax advantages for start-ups and investors, a solid accomplishment in proactive governance.

This positivity and activity is a microcosm of the nation’s sentiment on tech. And it is an extremely good thing. The current state of technology allows for delivery of products and services on a massive scale with minimal starting capital and human investment. The small businesses that create these products are the drivers of hiring in a weak labor market. It seems the entire nation’s entrepreneurial spirit has been awakened by boom in consumer technology.

Yet we should be mindful that technology cannot cure all of our ills, either nationally or in Louisiana. Our economy is hamstrung primarily by low employment. Without jobs, its hard for consumers to increase demand and drive growth. High unemployment places greater pressure on the social safety net. Fewer people pay taxes while more draw from the common pool of funds.

Forget the unemployment rate, the national labor participation rate was at 64.2% in May. That means the percentage of the population employed is at its lowest since 1984. A lot more moms voluntarily stayed home in those days.

There are major limits of technology’s effect on employment, and therefore, the economy. First, technology requires highly skilled labor. Most unemployed don’t have the necessary abilities to jump on the next hot tech start-up and program away. Locally, the lack of tech skills is frequently cited as a major factor limiting the industry’s growth in the region.

Second, what the labor tech does require is smaller than other industries because computers automate work people might do otherwise. Technology also allows for greater outsourcing as information transfer trumps national barriers.

It is no wonder there is a hiring frenzy for tech employees in a soft labor market when their skills are in limited supply and have an outsized effect.

Technology does improve economic efficiency in other industries. However, efficiency does not always yield economic gain. We used to have to pay for much of the information we get on the internet. Now the New York Times paywall is a notable exception to the rule. Not paying for information and other content has a profound effect on employment and (obviously) income in these industries.

Furthermore, the benefits of technological improvement are not widely distributed because not everyone can use them or afford them. Better design can make advancements cheaper and easier to use for the inexperienced.

On the other hand, using technology becomes seeming more complex as processing power increases. Those lacking savvy seem to fall further and further behind. Have you watched your mom use a computer lately? What about your grandma? Now imagine those kind of skills on kids growing up today without access to computers and you can see a giant cap between the haves and have-nots in future employability.

The tech industry also has indirect effects that aren’t always recognized. Namely, technology isn’t as green as it appears. Server warehouses the size of football fields run on electricity. Computing now accounts for more pollution than the airline industry.

These obstacles are all surmountable. Technology education can build tomorrow’s workforce. In this regard, the Silicon Bayou has the need and the ability to improve. Improvements in server and energy infrastructure can lessen the environmental impact of computing.

But as things stand, the tech industry should be viewed as part of multifaceted solution rather than a economic panacea. Other industries can produce rockstars too.